2019 (6) TMI 213 - AT - Service Tax

Classification of services - construction services or works contract services - benefit of N/NN. 1/2006-ST denied - benefit denied on the ground that they have utilised cenvat credit of GTA services for payment of Service tax on Commercial and Industrial Construction Service for March 2006 - HELD THAT - Admittedly the Appellant were registered under the category of construction service and no dispute was raised by them regarding classification of service. Even though the category of Works Contract came into effect from 01.06.2007, they applied for said category only in January,2008. They never contested their classification of services before authorities. They had paid service tax on GTA Services under reverse charge mechanism and also availed credit of same - Whatever services of GTA were availed by them was in respect of Construction service and the exemption on value which is in excess of 33% was availed by them continuously. Obviously the tax on construction services paid by them was in respect of continuous service of Construction activity. The construction activity was not initiated and completed in March 2006, therefore the GTA services before March 06 has clear linkage for the service tax paid on construction service in March 06. Appellant did not contest the levy of service tax on construction services, but classified their services into Works Contract Service only w.e.f. Jan 2008. Hence prior to such period the services would remain classified under Construction Services . In case of reversal of the credit utilised by them they are eligible for benefit of exemption Notification - matter remanded to the adjudicating authority to ensure that the credit is reversed along with interest within four weeks of the passing of this order subject to which the Appellant shall be eligible for the benefit of impugned subject notification. Appeal allowed by way of remand.

Summary

Issues:
1. Applicability of exemption notification on service tax credit utilization.
2. Classification of services under "Works Contract" category.
3. Imposition of penalties under various sections.
4. Effect of separate Mumbai Tribunal judgment on the present case.

Analysis:
1. The Appellant, engaged in construction services, utilized service tax credit on GTA services for paying service tax under reverse charge mechanism. The dispute arose when the department denied the benefit of exemption notification for the service tax paid in March'2006, leading to a demand against the Appellant. The Appellant contended that the credit utilized did not pertain to services rendered in March'2006, but the adjudicating authority upheld the demand. The Commissioner (Appeals) also affirmed the decision, prompting the Appellant to file the present appeal challenging the denial of exemption (Notification No. 1/2006 - ST).

2. The Appellant argued that their activities were classified under "Works Contract Service" from 01.06.2007, and prior to that date, they were not taxable under any other category. They cited various judgments to support their claim that the credit of service tax availed was for the period Jan'2005 to Feb'2006, and the utilization of credit was not prohibited by the exemption notification. The Appellant also contested the penalties imposed under different sections, asserting that they had informed the authorities about the transactions.

3. On the other hand, the revenue contended that the Appellant was registered under "Construction Services" and later applied for inclusion of "Works Contract Services" in their registration from 01.06.2007 onwards. The revenue argued that the Appellant's claim of being covered under "Works Contract" before 01.06.2007 was not acceptable, citing a Tribunal judgment. The revenue supported the findings of the lower authorities regarding the classification and tax liability of the Appellant.

4. The Appellate Tribunal, after considering both sides, observed that the Appellant had not contested their classification under "Construction Services" until they applied for "Works Contract Services" in January 2008. The Tribunal found a clear linkage between the GTA services availed by the Appellant and the service tax paid on construction services, indicating a continuous activity. While acknowledging the Mumbai Tribunal's decision in a separate case involving the Appellant, the Tribunal remanded the matter to the adjudicating authority for the reversal of credit, allowing the Appellant the benefit of the exemption notification upon compliance within a specified timeframe. The appeal was allowed by way of remand to the adjudicating authority.